Determinants Of Microfinance Loan Repayment Performance : A Case Of Omo Microfinance Institutions (OMFIs) In Gurague Zone

Abstract

The study was conducted on determinants of Microfinance loan repayment performance in omo microfinance institution of Gurague zone district, SNNPRS, Ethiopia. The study uses a mixed-methods approach and stratified random sampling has been adopted to select a sample of urban and rural borrowers in terms of loan repayment status as (defaulter and non-defaulter). Hence, from total loan beneficiaries in the district, 389 borrowers were selected randomly followed by a probability proportional sample from the Gurague zone district.. Accordingly, both primary and secondary data were collected and have been processed and analyzed using quantitative and qualitative analysis techniques. Descriptive statistics were employed to summarize and describe the socio-economic characteristics of the respondents. Furthermore, t-test analyses were also employed to compare defaulters and non-defaulters with the explanatory variables. In addition, binary logit econometric model was employed to identify the factors that influence loan repayment performance of the selected sampled loan beneficiaries. According to the regression, the result shows that age, educational level, family size, the residence of borrowers, other sources of income, participation in social festivals, method of lending, and suitability of installments period have significantly related to loan repayment, whereas gender, the distance of borrowers from institution loan size, business type and timeliness of loan releas have not significant determinants of loan repayment performance of omo microfinance institution’s borrower and the institution better to revise loan installment period and expand the collection period, so as some the loan financed activities require more than a year to get a return from investment